Automobile insurance policies commonly include a clause that requires the insurer to provide a legal defense for claims made against the insured driver. Insurers have a right to contest coverage for any claim, though, and when this happens the insurer is faced with the dilemma between its contractual duty to defend the insured and its interest in avoiding coverage. This is because the insurer has a duty to defend its insured even though it may ultimately be determined that it does not have any liability for coverage. This duty is avoided only in cases where it is absolutely clear from the facts that coverage does not apply; where the existence of coverage could turn on the resolution of the plaintiff’s allegations, however, the insurer is obligated to provide a defense.
The Louisiana State Bar Association’s Committee on Professional Ethics and Grievances has stated in a formal opinion that “[w]here the insurer either denies coverage to the insured or reserves its rights to do so subsequently, … the Committee is of the opinion that it would be improper … for the same attorney to represent both the insurer and the insured” See Opinion No. 342 (May 30, 1974). Accordingly, under Louisiana law, if the insurer chooses to represent the insured but deny liability coverage, it must employ separate counsel. See, e.g., Belanger v. Gabriel Chemicals, Inc., 787 So.2d 559 (La. App. 1st Cir. 2001).
This issue was central to the resolution of Wrights v. Progressive Casualty Insurance Co., No. 2010-CA-0327 (La. App. 1st. Cir. 2010). On April 25, 2006, the vehicle in which Nedra Wrights was traveling was rear-ended by a car driven by Joshua Tourere. The impact sent Wrights’s vehicle off the road where it struck a sign and two parked cars. When the crash occurred, Tourere was running an errand for his employer, T&T Seafood. Progressive Insurance had issued an automobile libility policy to T&T which listed coverage for several specific vehicles. The car Tourere was driving was not among those listed on the policy. Thus, after being informed of the accident and investigating, Progressive sent T&T a letter concluding that there was “no coverage available for this loss.” This letter did not inform T&T that it should consult its own attorney if it wished to dispute Progressive’s decision about coverage. Despite having sent this correspondence to T&T, Progressive subsequently appointed a single attorney to defend both Progressive and T&T when Wrights filed her lawsuit on February 21, 2007. In fact, this attorney represented both T&T and Progressive through the answering of the complaint and part of discovery. Not until some 17 months later did Progressive provide a second attorney for T&T’s separate defense. Shortly after doing so, the attorney then solely representing Progressive obtained critical information about the case through an affidavit from the owner of T&T without informing the owner that he, the attorney, no longer represented T&T. After obtaining the affidavit, Progressive filed a motion for summary judgment asserting that there was no coverage under the policy. T&T responded by arguing that Progressive had waived any defense it may have had over coverage by initially appointing the single attorney to represent both itself and T&T in the matter. After a hearing, the trial court denied Progressive’s motion and granted T&T’s.
On appeal, the First Circuit noted that the “actions on the part of Progressive not only constituted a conflict of interest, but they constituted conduct so inconsistent with an intent to enforce its right to assert its coverage defense as to induce a reasonable belief that the right had been relinquished.” Additionally, the court observed that “T&T was represented by an attorney who actively took steps detrimental and prejudicial to its position in the lawsuit.” Accordingly, the court found that “Progressive waived its coverage defenses by assigning only one attorney to represent itself and its insured for seventeen months despite having knowledge of facts indicating noncoverage under the policy,” and affirmed the trial court’s decision.
This case offers a reminder that when a car wreck occurs, insurance coverage may not be clear and straightforward. While clearly a crucial question for the defendant, it is also important for the plaintiff, as the defendant himself may not have sufficient assets with which to satisfy a judgment for damages. Either way, bringing an attorney into the situation is crucial because they can spot such conflicts of interest and make sure that your legal interests are maintained and protected.
If you have been injured in a car accident, call the Berniard Law Firm today toll-free at 1-866-574-8005 and speak with a trial lawyer who can help you get the recovery you deserve.